Does Homeowners Insurance Cover Detached Garages?

Your homeowners insurance policy covers all the buildings on your property. Whether you own a detached garage, a gazebo, a fence or a potting shed, they're all covered. That doesn't guarantee, however, that if your detached garage burns down, your insurance is enough to replace it. Go over your policy to find out whether it's what you need -- or whether you'd be better off with more coverage.

When reading your policy, you'll find the coverage for detached structures -- the ones that are on the lot, but separate from your house -- in the Coverage B section. The standard homeowners policy commits up to 10 percent of the face value of the policy to cover detached buildings. If your policy limit is, say, $220,000 for your house, the most you can get if your detached garage burns down is $22,000.

You can use your garage for your car, storage space, an out-of-earshot place for your son's drum solos -- but you run into insurance problems if you use it for business. If your detached garage or potting shed is where you store business inventory or where you work on jewelry you intend to sell, the coverage drops to zero. Insurers don't want to cover business property under your homeowners policy, nor do they want to provide liability if a customer slips and falls at your house.

If you'd like more coverage for your garage -- more coverage than 10 percent of the face value of the policy -- you can pay a higher cost and boost your detached-building coverage. For a home business, you need specific home-business insurance. If you only need a couple of thousand in business coverage, you can get that for $25 to $50 a year. For more coverage, you may end up paying $500 a year or more, depending on your business. This often includes professional liability insurance along with your home-office coverage.

Even if you're satisfied with your coverage, the National Association of Insurance Commissioners recommends you go over your policy every year. Life gets busy, and if you add a detached garage -- or swimming pool, or a kiddie playhouse -- you may forget that it makes your property worth more than when you took out your policy. An annual review keeps your coverage from falling behind the value of your assets.